Question

Carlton Company uses the percent of sales method to estimate its bad debt expense. Based on past experience, the company estimates 2 percent of credit sales to be uncollectible. At the end of the current year, the company's unadjusted trial balance shows Accounts Receivable of $245,000 and Credit Sales of $900,000.
Required:
Prepare the necessary december 31 adjusting entry by selecting the account names from the drop down menus and entering the dollar amounts in the debit or credit columns.

Answer 1

Answer:

Debit Bad debt expense with 18,000 ; and Credit Allowance for doubtful accounts with 18,000

Explanation:

Bad debt expenses = $900,000 × 2% = $18,000

The adjusting journal entries will look a s follows

Details                                                                Dr ($)              Cr ($)    

Bad debt expense                                           18,000

Allowance for doubtful accounts                                           18,000

To record the uncollectible Accounts Receivable